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Question
The rate of which commercial banks borrow from the Central Bank is the:
Options
Bank rate
Deposit rate
Lending rate
None of these
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Solution
Bank rate
Explanation:
The bank rate is the rate at which commercial banks borrow from the central bank. It is defined as "the rate at which the central bank is ready to rediscount the first-class securities and bills presented before it by the commercial banks." Central banks employ the bank rate as a monetary policy tool to influence the economy.
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Which of the following is a selective/qualitative method of credit control.
Give any two reasons as to why a country needs a central bank.
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Publicity
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
What is this policy called that controls the credit supply in an economy?
What are quantitative methods of credit control?
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Describe two quantitative credit control measures of the Central Bank.
